Ripple effects of global crisis set to hit East Africa

Central Bank governors from East Africa are projecting a slowdown in export demand, foreign direct investment, remittances, and foreign aid as the after shocks of the global financial crisis begin to sink in the region’s economies.

The governors said yesterday in a joint statement on the sidelines of a an East African Community monetary affairs committee (MAC) meeting in Kigali, Rwanda.

They said that though the region escaped effects of the initial round of the global crisis, the ripple effects are certain to hit their economies, necessitating caution in key economic and financial sectors.

The latest outlook released this week by the African Development Bank (AfDB), the Organisation for Economic Cooperation Development (OECD), and the UN Commission for Africa showed that East Africa and Africa as a whole would be affected by the global financial crisis.

According to the report titled African Economic Outlook, the prevailing global crisis has seriously affected African economies with GDP growth falling by more than half, from a projected 5.7 per cent to 2.8 per cent in 2009.

The report says the average growth rate for East Africa was projected at 7.3 per cent in 2008, down from a very strong 8.8 per cent in 2007.

“The region’s performance is expected to slow to 5.5 per cent in 2009 and remain about the same in 2010,” it said.

Ethiopia, Rwanda, Sudan, Tanzania, and Uganda — which were the fastest growing economies in East Africa in 2008 — are projected to maintain moderately robust growth in 2009 and 2010, according to the outlook, because demand for their major agricultural and horticultural exports is less sensitive to effects of the crisis.

On the other hand the Comoros and Seychelles are expected to continue stagnating, with depressed tourism due to the global recession, and civil unrest in the case of the Comoros.

“Growth in Djibouti, which registered at 5.9 per cent in 2008, is projected to accelerate in 2009 and 2010 to about 6.6 per cent,” the outlook said.

Kenya in its part is expected to exhibit a strong growth of about five percent this year due to the recovery of domestic demand after a slowdown in 2008.

Central bank governors from East Africa yesterday admitted the projected knocks on their economies and could have to seek alternative safety net measures.






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